Car rental market entry strategy

Market

• Size of the market
• Growth rate
• Segmentation
• Competition: How many competitors?
• Respective market shares
• Differentiation factors
• Alternative competitors/substitutes

Consumers

• Type of consumers: business, tourist, local /Segmentation
• The trend in consumer demand
• Capabilities/Core strengths

Brand

• Corporate agreements
• Customer Loyalty program

a) Client information: Any internal report or interviews conducted with the management of the company

b) External information: Market reports, internet

c) Consulting firm information: Any internal info from the consulting firm, reports, expert interviews

• Total Size of Car Rental Market in Baltic: €10m
• Annual Market Growth: 10%
• Net Profit Margin: 5% (in lieu of any details on cost structure)

Ask if there is more info on the market, like size, if there is data related to margins, etc. Then you would receive the following:

With such info you can calculate what is requested:

Market size after 3 years: €12.1m

Each market share percentile equals €6,050 in net profit for CarRentalCo

To reach a target of €200k in net profit, CarRentalCo would need about 30% market share in 3 years.

i) International Car Rental: 35% market share – serves primarily international business travelers and tourists.

ii) Local player: 45% market share – serves a mix of tourists and local customers.

iii) Other smaller rental companies: 20% market share – primarily local customers

• Organic growth is highly unlikely to get to the market share targets. Therefore, an acquisition is the best option.
• International can rental does not look like a good option to acquire since they are direct competitors
• The smaller companies do not seem a good option due to high complexity and still lower market share than the target
• Local players seem the best option. We will probably have enough cash for the acquisition and the 40% will be more than enough for the target

• The difference in existing customer base vs CarRentalCo’s targeted customers
• Local customers will move to smaller players as price-sensitive and unwilling to pay premiums for CarRentalCo
• Business travelers may not be impressed by the service quality of local players. This would require investment in staff training to bring service levels up to CarRentalCo standards
• Significant capital investment to bring car fleet up to CarRentalCo’s standards
• The difference in reservation and computer systems requiring IT investment and training
• Effort spent on integration might divert focus away from operations, resulting in potential benefits for competitors. They might gain additional market share and grow an even stronger foothold in the growing segments

Entering the Baltic market is recommended and an acquisition of a local player is the best strategy.

• The market is growing and it's a good opportunity
• The local player acquisition ensures the €200K target in profit for year 2
• This acquisition simplifies the M&A process since it only requires one acquisition with a 40% of market share

There are several challenges that we need to address for the integration related to the existing customers, IT systems, or company culture.